Landlord and tenant — Application for relief against forfeiture — Latest chapter in long history of litigation between Langham House Developments Ltd and Brompton Securities Ltd — Langham House holds a long-leasehold interest in premises at Dover Street, London W1, and granted an underlease to Brompton, now in liquidation — There had been a history over many years of difficulties in recovering rent from Brompton in respect of the underlease, leading to the commencement of 11 actions in all — A Mr Barber had been a party to the underlease in the capacity of guarantor and had subsequently entered into a contract to purchase the underlease from Brompton; Brompton became a bare trustee for him and he was the person effectively interested in relief against forfeiture if forfeiture of the underlease took place — Mr Palmer was also interested in the premises as his home and place of business — In the latest proceedings Langham House obtained an order for possession from the registrar of the Companies Court, which was upheld by Mervyn Davies J — He mentioned that Mr Palmer’s position was not prejudiced because, if Langham House sought to enforce their possession order, Mr Palmer would be able to apply in the Queen’s Bench or Chancery Division for relief against forfeiture — Mervyn Davies J referred to the decision of Oliver J (as he then was) in Re Blue Jeans Sales Ltd — Langham House applied for leave to issue a writ of possession in the Companies Court and served notice on the occupiers, including Mr Palmer, who in the meantime was supplying funds for payment of the arrears of rent and of mesne profits — The liquidator of Brompton made the application now before Vinelott J for relief against forfeiture
merits of the case were concerned, there were no grounds for refusing relief —
It appeared that the rent would be paid by funds supplied by Mr Palmer, the
beneficial owner of the underlease, and it also appeared that Mr Palmer had
succeeded in entering into a conditional contract for the assignment of the underlease,
subject to the consent of Langham House — There was, however, a procedural
question as to whether it was appropriate for an order for relief to be made in
winding-up proceedings — Held that, without laying down any general rule, there
was no reason against making such an order in the present case — The actual
parties were the landlord and the tenant company in liquidation, not Mr Palmer,
and it would be pointless to require Brompton to make a separate application,
with duplication of costs, in independent proceedings by writ or originating
summons in the Chancery Division — This would be an unnecessary formality
The following
cases are referred to in this report.
Blue
Jeans Sales Ltd, Re [1979] 1 WLR 362; [1979] 1 All
ER 641
Brompton
Securities Ltd, Re [1988] 2 EGLR 93; [1988] 49 EG
77; [1988] BCC 189
Gill v Lewis [1956] 2 QB 1; [1956] 2 WLR 962; [1956] 1 All ER
844, CA
Lovelock v Margo [1963] 2 QB 786; [1963] 2 WLR 794; [1963] 2 All ER
13, CA
Newbolt v Bingham (1895) 72 Law Times 852
Public
Trustee v Westbrook [1965] 1 WLR 1160;
[1965] 3 All ER 398, CA
Rolls
Razor Ltd (No 2) Re [1970] Ch 576; [1970] 2 WLR
100; [1969] 3 All ER 1386
Shilena
Hosiery Co Ltd Re [1980] Ch 219; [1979] 3 WLR 332;
[1979] 2 All ER 6
This was an
application by Brompton Securities Ltd for relief against the forfeiture of an
underlease of premises at 5-7 Dover Street, London W1. The application was made
by the liquidator of Brompton Securities Ltd by a summons in the winding-up
proceedings. The application had been adjourned from the master to the judge.
The other party was Langham House Developments Ltd.
Matthew
Collings (instructed by Jerrard Saunders Donn) appeared on behalf of Brompton
Securities Ltd; Paul de la Piquerie (instructed by Bower Cotton & Bower)
represented Langham House Developments Ltd.
Giving
judgment, VINELOTT J said: This is an application for relief against
forfeiture. It is the latest, and I hope the last, chapter in a long history of
litigation between a company called Langham House Developments Ltd (‘Langham
House’) and a company now in compulsory liquidation called Brompton Securities
Ltd (‘Brompton’). The history of the litigation is set out in a judgment of
Mervyn Davies J, which is reported in Re Brompton Securities Ltd [1988]
BCC 189*. However, to make this judgment intelligible, I should, I think,
summarise the salient events.
*Editor’s
note: Now reported at p 93 ante.
Langham House
is the lessee under a long lease of premises at 5-7 Dover Street, London W1. In
1977 Langham House granted an underlease to Brompton for a term of 42 years
from June 24 1973 at a rent of £47,000 subject to review. The rent was
subsequently increased from December 25 1982 to £90,000 per annum. The next
review is due to take place on December 25 next. It is said by Langham House
that it will be increased to something over £200,000, that being, it is said,
the current market rent. A Mr C J Palmer was joined in the underlease to
guarantee the performance by Brompton of its obligations. The order for the
compulsory winding-up of Brompton was made on February 1 1982.
Langham House
has experienced difficulty in recovering rent from Brompton since the commencement
of the winding-up. After the winding-up the rent was paid for some years by Mr
Palmer, but it was not always, if ever, paid promptly. A summary of the actions
that have been brought by Langham House to recover rent is set out in an
affidavit by a partner in the firm of solicitors acting for Langham House.
Shortly stated, since 1978 Langham House has commenced 11 actions in all. The
first six actions were brought against Brompton and Mr Palmer. The next three
actions were brought after the order for the winding-up of Brompton and were
brought against Mr Palmer alone. The last was brought, with the leave of the
court, against both Brompton and Mr Palmer. That was on May 16 1986. The claim
was for just under £50,000, a substantial sum, but, of course, £45,000 was a
six-monthly instalment of rent. Langham House obtained judgment in default of
appearance on August 16 1986. Shortly before judgment was given, on July 22
1986, Brompton, by its liquidator, agreed to sell the lease to Mr Palmer for
£9,000. The contract included ‘the right to apply at (Mr Palmer’s) expense to
the court for relief against forfeiture’, and Brompton agreed that it and the
liquidator would, at Mr Palmer’s expense, ‘do all things required and necessary
. . . (ii) to obtain relief against forfeiture of the lease and/or such other
relief as may be appropriate; (iii) to obtain the consent of the reversioner to
the assignment of the lease to the purchaser or as he may direct’. Under the
special
There was no completion date, the date being at the discretion of Mr Palmer.
The underlease, of course, contained the usual qualified covenant against
assignment without consent, but the usual provision in the National Conditions
of Sale making a contract for the sale of leasehold property subject to the
reversioner’s consent being obtained where necessary was excluded. So the
contract was an unconditional contract and the purchaser having paid the
purchase price, Brompton became a bare trustee for him.
Returning to
the action, Brompton applied for relief against forfeiture. An order was made
by Master Warren on March 19 1987 giving Brompton relief, substantially all the
arrears having then been paid, but on condition that a small sum of arrears of
rent was paid forthwith and that works were done to comply with a schedule of
dilapidations served by Langham House within three months. These works were not
carried out promptly. On July 8 1987 Brompton applied to Master Bickford-Smith
for an extension of time. That application was refused. Brompton appealed. The
appeal came before His Honour Judge Dobry QC sitting as a judge of the High
Court. That was on October 13 1987. The repairs had then been done. He extended
the time up to the date of the hearing, so effectively giving Brompton relief
against forfeiture. That was the end of that action.
In the
meantime further rent accrued. The rent is payable quarterly in advance.
Langham House applied to the Registrar of the Companies Court for leave to
bring a further action. Mr Registrar Bradburn, on May 14 1987, following a
decision of Oliver J (as he then was) in Re Blue Jeans Sales Ltd [1979]
1 WLR 362, gave leave for the application to be amended to ask for an order for
possession. The application so amended came on for hearing on December 10 1987
and Mr Registrar Bradburn made an order for possession. An appeal to Mervyn
Davies J was dismissed. It was argued on behalf of Brompton that Mr Palmer ‘has
a right to seek relief against forfeiture of the underlease in that he is
interested in the premises as being his home and his place of business and
having the rights acquired under the agreement dated July 22 1986. As well it
is said that he has spent about £20,000 in building works at the premises
pursuant to a condition imposed when relief against forfeiture was allowed in
the Queen’s Bench Division’. Mervyn Davies J referred to the judgment of Oliver
J in Re Blue Jeans Sales, where Oliver J made an order for possession
against a company in compulsory liquidation in an application by the landlord
for leave to issue proceedings for forfeiture on the ground that the landlord
would have to give notice to the persons in occupation before issuing a writ of
possession, and that those persons would then have an opportunity of applying
for relief against forfeiture. Oliver J concluded that:
If the
subtenant or a mortgagee does take proceedings against the landlord for relief,
then presumably the landlord will not make an application for the writ of
possession to issue unless and until those proceedings have been concluded and
any claim for relief has been refused because, if a claim for relief is
granted, the matter becomes academic.
Mervyn Davies
J held* that that principle was applicable in the instant case because:
. . . Mr
Palmer is not prejudiced because if and when Langham House seek to enforce
their possession order Mr Palmer will be notified and he will then be able, if
so advised, to apply in the Queen’s Bench Division or in the Chancery Division
for relief against forfeiture. I wish to add that Mr Collings
counsel for
the appellant liquidator
fully
appreciated the importance of the Blue Jeans case. He sought a
distinction on the facts contending, as I understand it, that the Blue Jeans
occupiers appeared to be less closely connected with the premises there than is
Mr Palmer here: bearing in mind Mr Palmer’s residence at the premises, his
place of business there, his past payments of rent and his agreement to buy for
£9,000. To my mind those facts do not detract from Langham House’s right to
obtain a possession order against the liquidator, albeit that such facts may
strengthen Mr Palmer’s position if and when he is advised to seek relief
against forfeiture.
*Editor’s
note: See p 93 ante.
That judgment
was given on January 13 1988. On January 21 Langham House applied for leave to
issue a writ of possession in the Companies Court and served notice on the
occupiers, including, of course, Mr Palmer. The liquidator’s solicitors then
sent Langham House’s solicitors a bankers’ draft which had been provided by Mr
Palmer for the arrears of rent which had been unpaid since March 1987, and on
February 11 1988 the liquidator issued the application which is now before me
for relief against forfeiture. A further bankers’ draft covering rent due on
March 25 1988 was sent to Langham House’s solicitors on March 24 and was
accepted as a contribution towards mesne profits falling due after March 25
1988. A sum has also been agreed and set aside to cover the costs of this
application.
The question
has been raised whether or not the application for relief against forfeiture
can properly be made, or is appropriately made, by a summons in winding-up
proceedings. I will return to this point later. I think it will be convenient
to deal first with the substantial question whether Brompton has established
grounds for relief.
It is trite
law that, save in very exceptional circumstances, the court will grant relief
against forfeiture to a tenant on payment of all rent in arrears and costs, and
will do so notwithstanding that actions have had to be brought on previous
occasions to recover the rent. The court may refuse to grant relief against
forfeiture if the parties have altered their position in the meantime and, in
particular, where the rights of third parties have intervened, relief ought not
to be granted where the effect of it would be to defeat the new rights of third
parties or be unfair to the landlord having regard to the way in which he has
altered his position (see Gill v Lewis [1956] 2 QB 1 per Jenkins
LJ at p 10). There are exceptions to this rule, for instance (an example given
by Jenkins LJ) where ‘the court, on being appraised that the premises are being
consistently used for immoral purposes, will decline the tenant any relief or
assistance which would in any way further his use or allow the continuance of
his use of the house for those immoral purposes’. However, as Gill v Lewis
shows, the circumstances must be very exceptional. In that case the Court of
Appeal treated the facts that ‘the tenants having been bad payers in the past
and the fact that they have been elusive when attempts have been made to serve
them’ as irrelevant matters for consideration: see per Hodson LJ at p
17. One of them had been convicted for indecent assault on the demised
premises.
Applying those
principles to the present case, it is quite plain that, apart from the fact
that Brompton is in compulsory winding-up and has admittedly no assets with
which to meet the rent, there is simply no ground on which the court could
refuse to grant relief. In the words of Lord Esher in Newbolt v Bingham
(1895) 72 LT 852, ‘there is no longer any real discretion in the matter’. Mr de
la Piquerie submitted that a time must come when persistent failure to pay rent
until proceedings are commenced and prosecuted to judgment may justify the
court in refusing relief. The lapse of a very long period (22 years) where rent
had remained unpaid was one of the factors relied on by the Court of Appeal in
refusing relief against forfeiture in Public Trustee v Westbrook
[1965] 1 WLR 1160. That, of course, is miles away from the present case. Master
Warren granted relief against forfeiture a year ago, and although the rent
later fell into arrears, the arrears have since been brought up to date and
security for costs has been given. Mr de la Piquerie submitted that principles
established in the 19th century when the value of money was stable may have to
be re-examined now that we have become accustomed to perpetual inflation
(albeit at a lower rate than a few years ago); it is no longer true that a
lessor is fully compensated by a payment in full in depreciated currency with
an order for costs which may not recompense him fully for expenses incurred.
However, that is not a re-examination which it is open to me to undertake.
The case for
Langham House, in substance, is that it is unfair and unjust that Langham House
should have to continue to look for payment of rent and performance of the
other covenants in the lease to a company which is admittedly insolvent and
which is, in effect, a trustee of the benefit of the lease for another. I do
not think that that is a ground for refusing relief. Once arrears are brought
up to date Langham House will be in no different position from any other lessor
with an impecunious tenant. It would be an entirely new departure for the court
to decline to grant relief on the ground that a tenant has been a bad payer in
the past and is likely to continue to be a bad payer in the future. If Mr
Palmer continues to put Brompton into funds to pay the rent (and as the
beneficial owner of the lease it will be in his interests to do so), Langham
House will get all that the law says it is entitled to. If he does not, cadit
questio, Langham House will be entitled to possession. In fact it is
probable the rent will be paid in the future. An application has recently been
made to Langham House for consent to an assignment to another company, and the
inference must, I think, be that Mr Palmer has succeeded in entering into a
conditional contract for the further assignment of the lease. If the
proposed assignee can satisfy Langham House that he is likely to be a
satisfactory tenant, Langham House will have all the protection that it is
entitled to.
However, a
question has been raised whether it is appropriate for an order for relief to
be made in winding-up proceedings. Mr de la Piquerie, in his very helpful
argument, conceded, I think rightly, that the question is not one of
jurisdiction. Although winding-up proceedings are not ‘an action’ within
section 38 of the Supreme Court Act 1981, the court has an inherent
jurisdiction to grant relief against forfeiture: see Lovelock v Margo
[1963] 2 QB 786. Further, the jurisdiction can be exercised by a High Court
judge hearing company business. That latter jurisdiction has been considered
fully in two recent cases, Re Rolls Razor Ltd (No 2) [1970] Ch 576 and Re
Shilena Hosiery Ltd [1980] Ch 219.
I need refer
to only one passage in the latter case, where Brightman J (as he then was)
said, at p 224:
The Companies
Court is not a court separate and distinct from the High Court, with its own
peculiar jurisdiction. The jurisdiction to wind up a company is conferred on
the High Court, not the Companies Court (see section 218(1) of the Companies
Act 1948), nor is the Companies judge invested with a special jurisdiction not
possessed by a High Court judge sitting elsewhere. The Companies Court is a way
of describing the High Court when dealing with matters originating in the
chambers of the Bankruptcy Registrar dealing with company matters, and the
Companies judge is a way of describing a High Court judge when trying such
matters. If authority were needed for this proposition it will be found in Re
Rolls Razor. . . . Once it is accepted that the Companies Court is merely a
description of the High Court when operating through the chambers of the
Bankruptcy Registrar dealing with company matters, the question of jurisdiction
is greatly narrowed because every judge of the High Court has jurisdiction to
grant relief under section 172 of the Law of Property Act, whether he is or is
not sitting as the Companies judge. All that remains is a procedural question,
namely whether relief under section 172 is capable of being granted in
proceedings begun by a summons issued in the Companies Court as distinct from
some other form of procedure.
In that case
Brightman J came to the conclusion that he had jurisdiction to hear the
application in a matter which arose in consequence of the liquidation and was
one which it was necessary to decide before the winding-up was completed, and
that there was, accordingly, no reason to require it to be litigated outside
the Companies Court.
The question
is whether it is similarly appropriate that the application for relief against
forfeiture should be determined in a summons by the liquidator of Brompton, or
whether Brompton should be required to issue a writ or originating summons
claiming relief against forfeiture in the Chancery Division, a step which in
the context of this case would be no more than a formality.
A similar
question arose in Re Blue Jeans Sales Ltd and Oliver J sought further
argument on it. He said at p 368:
After I had
considered this matter the other day, it occurred to me that if it be the
situation that, when a landlord applies for the enforcement of the order of
possession by the issue of a writ of possession, there is left an opportunity
for third parties to apply to the Companies Court for relief from forfeiture,
that would be an extremely inconvenient way of proceeding because it would mean
that the registrar would be trying, in effect, proceedings between third
parties which really had nothing whatever to do with the company, the company
being no longer concerned in the matter because the order for possession had
been made against it. So far as it was concerned, the lease had been forfeited.
But I am satisfied that that is not in fact the position. The only right that
the third party, whether he be a mortgagee or a sublessee, has to claim relief
from forfeiture — and that is really what all this is about — is the right
which is conferred by section 146 of the Law of Property Act 1925 which enables
such a person to apply for relief in the action of the landlord, if any, or
otherwise by action of his own. It is clear that a winding-up proceeding — and ex
hypothesi the order here is made in the winding-up — is not an ‘action’ and
therefore this is not a case where the subtenant or mortgagee could apply for
relief in the landlord’s summons in the winding-up. It is a case where, if
relief is sought to be granted at all, it must be applied for by a separate
proceeding. That proceeding would be something taking place altogether outside
the liquidation, and therefore the registrar would not, as I see it, be
concerned in the matter at all.
In the instant
case the application for relief against forfeiture is made by Brompton. It is
at best doubtful, notwithstanding the argument before Mervyn Davies J, whether
Mr Palmer is entitled to apply for relief against forfeiture. The issue is thus
between litigants who are already parties to an application for leave to issue
a writ of possession. Mr de la Piquerie submitted that it would none the less
be right as a matter of practice to require a company in the position of
Brompton to apply in the Companies Court for leave to commence proceedings for
relief against forfeiture; the landlord could then ask that leave should only
be given conditionally on security for costs being provided. There may be cases
where that would be the appropriate course. I must decline the invitation to
lay down any general rule. On the facts of the instant case the issue is one
which arises in connection with the winding-up. It arises in consequence of
Langham House’s application there for leave to issue a writ of possession. The
issue arises only between the landlord and a company in liquidation, and the
evidence in support of an application for leave to commence proceedings would
necessarily cover all the facts relevant to the question whether relief against
forfeiture should be given. In these circumstances it would be pointless to put
Brompton to the expense of making a separate application. Mr de la Piquerie,
very helpfully, if I may say so, accepted that that was so and he put these
arguments before me because, as he said, the question is one which not
infrequently arises. I understand that cases where an insolvent company is put
in funds to pay rent in arrear so as to avoid forfeiture of a lease which may
be a valuable and realisable asset are not uncommon. In my judgment, save in
exceptional circumstances, there is no reason why in such cases the application
for relief against forfeiture should not be made by summons in the winding-up.
It would, as I see it, create needless duplication of costs for the judge to
hear the application for relief in the winding-up proceedings and review the
same evidence in the application for relief.
Each party
was ordered to pay own costs of present hearing before Vinelott J. Applicant to
pay costs reserved of hearings before registrars.